IDAHO PUBLIC UTILITIES COMMISSION

February 23, 2008

IPC-E-07-03

Contact: Gene Fadness 208.334.0339

Website: puc.idaho.gov

Utility proposes end to reduced wind project size cap

Larger wind projects could once again qualify for a
published rate that is typically higher than market rates when they sell their
output to Idaho Power Company if state regulators approve a petition recently
filed by the utility.

Idaho Power is proposing that the current 100-kilowatt
limit on wind projects that can qualify for the higher rate be moved back up to
10,000 kilowatts or 10 megawatts.

Under the federal Public Utility Regulatory Policies Act
of 1978 (PURPA), regulated utilities such as Idaho Power Co. must buy power
from generators of renewable energy at a rate that is published by state
utility commissions. That rate, currently about $64 per megawatt-hour, is
called the avoided-cost rate. The rate is intended to be based on the cost the
utility avoids when it buys from a PURPA project and thus does not have to generate
the power itself or buy it from another source. However, Idaho Power Co. and
other utilities have questioned whether the current PURPA rate is truly based
on avoided-cost since it does not take into account the costs the company
incurs when it has to use its hydroelectric facilities as the backup for wind
generation. Wind can cost more for utilities when projected wind output is not
met and the utility is forced to generate its own back-up power or buy from
another more expensive resource.

In June 2005, Idaho Power Co. asked the commission to
suspend further PURPA wind projects until the costs of integrating wind into
the company's transmission could be determined. The commission denied the
company's request to suspend PURPA projects, but did agree to lower the size of
wind projects that can qualify for the PURPA rate from 10 MW to 100 KW until an
appropriate wind integration cost could be determined.

Idaho Power recently completed a wind integration study
and is now asking the commission for a return to the 10 MW size cap if wind
developers: 1) agree to share in the cost of state-of-the-art wind forecasting
services; 2) include a guarantee in future wind contracts that demonstrates
projects are mechanically capable to generate at full output during 85 percent
of the hours during a month and 3) agree to accept a discount off the PURPA
rate to account for wind integration costs. Idaho Power is contending that
discount should be $10.72 per MW off the $64 per MW PURPA rate.

Further, Idaho Power would also agree to remove the
"90/110 performance band" now required in wind contracts. That
requirement stipulated that when output was less than 90 percent of projections
or more than 110 percent of projections, that Idaho Power could pay developers
a lesser market-based rate rather than the PURPA rate.

Idaho Power has scheduled a workshop with wind developers,
the commission staff and other interested parties to discuss the company's
petition. Following that workshop, commisson staff will file a status report with
a recommendation for further procedure. Idaho Power has notified interested
wind developers regarding the workshop. Those interested in knowing more about
the workshop may e-mail the company at mstokes@idahopower.com
or call 388-2688.

To see a complete copy of Idaho Power’s application, go to
www.puc.idaho.gov. Click on the
electric icon, then on “Open Electric Cases,” and scroll down to IPC-E-07-03.